Easy Rider Redux

Long-term care insurance is complicated. It’s also a hard topic to address with clients who often don’t want to think about the possibility that they might end up unable to care for themselves –or who don’t want to spend money on coverage they might not need. This can make it hard for advisors who try to be sure that all their clients’ bases are covered when it comes to protection.

The subject might have just gotten a bit more approachable, however, with Genworth Financial’s new take on its hybrid annuity that offers a single-premium, non-qualified deferred annuity bundled with a long-term care insurance rider. The policy, called the Total Living Coverage Annuity, saw a pilot issue in 2008. But the new version may be more appealing, thanks to the Pension Protection Act of 2006. On January 1 of 2010 a couple of provisions from that law took effect to make LTC payouts from the annuity tax free and also allow the coverage to be paid for with a tax-free 1035 exchange from another annuity or life insurance policy.

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, is delighted to see the new product out there on the market. He says such products “offer the greatest single new opportunity for investment advisors to protect their clients.” He cites two reasons for this.

First, Slome says, “up till now [advisors] have stumbled in terms of being able to comfortably tell clients why they should pay for insurance protection that they might never use.” Even though, he points out, an advisor can “argue till you’re blue in the face” that all insurance is something the client may never use, these hybrid products largely eliminate that concern for clients, since they’re first and foremost investment products.